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| 8-K - 8-K - EASTGROUP PROPERTIES INC | form8-k04202017.htm |
EXHIBIT 99.1 | |
FOR MORE INFORMATION, CONTACT:
Marshall Loeb, President and Chief Executive Officer
N. Keith McKey, Chief Financial Officer
(601) 354-3555
EASTGROUP PROPERTIES ANNOUNCES
FIRST QUARTER 2017 RESULTS
• | Net Income Attributable to Common Stockholders of $.38 Per Share Compared to $.67 Per Share for the Same Quarter of 2016 (2016 Includes Gains on Sales of Real Estate Investments and Non-Operating Real Estate of $.35 Per Share) |
• | Funds from Operations of $.99 Per Share Compared to $.91 Per Share for the Same Quarter Last Year, an Increase of 8.8% |
• | Same Property Net Operating Income (PNOI) Growth of 3.7% |
• | 97.0% Leased, 95.6% Occupied as of March 31, 2017; Average Occupancy of 95.6% for the Quarter |
• | Rental Rates on New and Renewal Leases Increased an Average of 17.4% |
• | Entered the Atlanta Market with the Acquisition of a 238,000 Square Foot, 100% Leased Property for $20 Million |
• | Started Construction of Three Development Projects Totaling 376,000 Square Feet in Charlotte, Orlando and Tampa with Projected Total Costs of $27 Million |
• | Transferred Five Development Projects Totaling 1,052,000 Square Feet to the Real Estate Portfolio |
• | Development Program Consisted of 15 Projects (2.2 Million Square Feet) at March 31, 2017 with a Projected Total Investment of $187 Million; $53 Million Remaining to be Invested at March 31, 2017 |
• | Paid 149th Consecutive Quarterly Cash Dividend – $.62 Per Share |
• | Issued 544,144 Shares of Common Stock During the Quarter with Gross Proceeds of $40 Million |
JACKSON, MISSISSIPPI, April 20, 2017 - EastGroup Properties, Inc. (NYSE: EGP) announced today the results of its operations for the three months ended March 31, 2017.
Commenting on EastGroup’s performance, Marshall Loeb, CEO, stated, “We are happy with a strong start to the year. Our 8.8% increase in quarterly FFO means that we've now achieved FFO per share growth in 23 of the past 24 quarters, truly a long term trend. Adding further emphasis to the trend, during first quarter we signed 2.8 million square feet of leases, our quarterly record high. The high leasing volume was complemented by GAAP re-leasing spreads of 17.4%, also a quarterly record. Overall, we still have lots of work to do in 2017 but are happy with how it's starting."
EARNINGS PER SHARE
On a diluted per share basis, earnings per common share (EPS) was $.38 for the three months ended March 31, 2017, compared to $.67 for the same period of 2016. The Company's property net operating income (PNOI) increased by $3,366,000 ($.10 per share) for the three months ended March 31, 2017, as compared to the same period of 2016. EPS for the first quarter of 2016 included gains on sales of real estate investments and non-operating real estate of $11,342,000 ($.35 per share).
FUNDS FROM OPERATIONS
For the quarter ended March 31, 2017, funds from operations attributable to common stockholders (FFO) was $.99 per share compared to $.91 per share for the same quarter of 2016, an increase of 8.8%. PNOI increased by $3,366,000, or 7.7%, during the quarter ended March 31, 2017, compared to the same period of 2016. PNOI increased $2,100,000 from newly developed and redeveloped properties, $1,579,000 from same property operations, and $673,000 from 2016 and 2017 acquisitions; PNOI decreased $944,000 from operating properties sold in 2016.
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P. O. Box 22728 – JACKSON, MS 39225 – TEL. 601-354-3555 – FAX 601-352-1441
Same PNOI increased 3.7% for the quarter ended March 31, 2017, compared to the same quarter in 2016; without straight-line rent adjustments, same PNOI increased 5.9%. Rental rates on new and renewal leases (7.7% of total square footage) increased an average of 17.4% for the quarter.
FFO and PNOI are non-GAAP financial measures, which are defined under Definitions later in this release. Reconciliations of Net Income to PNOI and Net Income Attributable to EastGroup Properties, Inc. Common Stockholders to FFO are presented in the attached schedule “Reconciliations of GAAP to Non-GAAP Measures.”
ACQUISITIONS
In February, EastGroup entered the Atlanta market with the acquisition of a three-building business distribution complex along the Georgia 400 technology corridor for $20 million. The buildings, which contain 238,000 square feet, are currently 100% leased.
DEVELOPMENT
During the first quarter, EastGroup acquired a small parcel of land (2 acres) in Charlotte for $659,000; the land will allow for further expansion of the Company's Steele Creek Commerce Park.
The Company began construction of three multi-tenant distribution properties during the first quarter of 2017; all three projects are expansions of parks developed by EastGroup. Details of the development projects started in the first three months of 2017 are included in the table below.
Development Properties Started in 2017 | Location | Size | Anticipated Conversion Date | Projected Total Costs | ||||||||
(Square feet) | (In thousands) | |||||||||||
Steele Creek VII | Charlotte, NC | 120,000 | 07/2018 | $ | 8,600 | |||||||
Horizon XII | Orlando, FL | 140,000 | 09/2018 | 11,200 | ||||||||
Oak Creek VII | Tampa, FL | 116,000 | 09/2018 | 7,200 | ||||||||
Total Development Properties Started | 376,000 | $ | 27,000 | |||||||||
At March 31, 2017, EastGroup’s development program consisted of 15 projects (2,216,000 square feet). The projects, which were collectively 53% leased as of April 19, 2017, have a projected total cost of $187 million with approximately $53 million remaining to be invested as of March 31, 2017.
During the first quarter of 2017, EastGroup transferred (at the earlier of 80% occupied or one year after completion) five development properties to the real estate portfolio as detailed in the table below.
Development Properties Transferred to Real Estate Portfolio in 2017 | Location | Size | Conversion Date | Cumulative Cost as of 3/31/17 | Percent Leased as of 4/19/17 | ||||||||
(Square feet) | (In thousands) | ||||||||||||
Alamo Ridge III | San Antonio, TX | 135,000 | 02/2017 | $ | 10,964 | 100% | |||||||
Eisenhauer Point 1 & 2 | San Antonio, TX | 201,000 | 01/2017 | 15,930 | 83% | ||||||||
Madison IV & V | Tampa, FL | 145,000 | 03/2017 | 8,668 | 82% | ||||||||
Parc North 1-4 | Dallas, TX | 446,000 | 02/2017 | 32,359 | 54% | ||||||||
South 35th Avenue | Phoenix, AZ | 125,000 | 01/2017 | 1,774 | 67% | ||||||||
Total Properties Transferred | 1,052,000 | $ | 69,695 | 71% | |||||||||
Subsequent to quarter end, EastGroup acquired 30 acres of land in the Round Rock submarket of Austin for $5.3 million. EastGroup's plans for future development of the land include a master-planned, multi-phased development project to be named Settlers Crossing which will consist of four business distribution buildings totaling approximately 340,000 square feet.
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P. O. Box 22728 – JACKSON, MS 39225 – TEL. 601-354-3555 – FAX 601-352-1441
DIVIDENDS
EastGroup paid cash dividends of $.62 per share in the first quarter of 2017. This was the Company’s 149th consecutive quarterly cash distribution to shareholders. EastGroup has increased or maintained its dividend for 24 consecutive years. The Company has increased it 21 years within that period, including increases in each of the last five years. The Company’s payout ratio of dividends to FFO was 63% for the quarter. The annualized dividend rate of $2.48 per share yielded 3.2% on the closing stock price of $78.10 on April 19, 2017.
FINANCIAL STRENGTH AND FLEXIBILITY
EastGroup continues to maintain a strong and flexible balance sheet. Debt-to-total market capitalization was 30.8% at March 31, 2017. For the first quarter, the Company had interest and fixed charge coverage ratios of 4.8x and a debt to adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) ratio of 6.6x.
During the first quarter, EastGroup issued and sold 544,144 shares of common stock under its continuous equity program at an average price of $73.51 per share, providing net proceeds to the Company of $39.5 million.
OUTLOOK FOR 2017
EPS for 2017 is now estimated to be in the range of $1.79 to $1.89. FFO per share attributable to common stockholders for 2017 is now estimated to be in the range of $4.18 to $4.28. The table below reconciles projected net income attributable to common stockholders to projected FFO.
Low Range | High Range | ||||||||||||
Q2 2017 | Y/E 2017 | Q2 2017 | Y/E 2017 | ||||||||||
(In thousands, except per share data) | |||||||||||||
Net income attributable to common stockholders | $ | 14,764 | 60,606 | 15,444 | 63,998 | ||||||||
Depreciation and amortization | 20,375 | 81,188 | 20,375 | 81,188 | |||||||||
Funds from operations attributable to common stockholders | $ | 35,139 | 141,794 | 35,819 | 145,186 | ||||||||
Diluted shares | 34,001 | 33,915 | 34,001 | 33,915 | |||||||||
Per share data (diluted): | |||||||||||||
Net income attributable to common stockholders | $ | 0.43 | 1.79 | 0.45 | 1.89 | ||||||||
Funds from operations attributable to common stockholders | 1.03 | 4.18 | 1.05 | 4.28 | |||||||||
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P. O. Box 22728 – JACKSON, MS 39225 – TEL. 601-354-3555 – FAX 601-352-1441
The following assumptions were used for the mid-point:
Metrics | Guidance for Q2 2017 | Revised Guidance for Year 2017 | Previous Guidance for Year 2017 (1) | Actual for Year 2016 | ||||
FFO per share | $1.04 | $4.23 | $4.20 | $4.02 | ||||
FFO per share increase over prior year period | 5.1% | 5.2% | 4.5% | 9.5% | ||||
Same Property Net Operating Income (PNOI) growth: | ||||||||
Unadjusted | 2.3% | 1.5% | 0.6% | 3.1% | ||||
Without Houston | 4.6% | 4.2% | 3.2% | 4.2% | ||||
Without straight-line rent adjustments | 2.2% | 1.9% | 0.9% | 3.1% | ||||
Without straight-line rent adjustments and Houston | 4.9% | 4.7% | 3.7% | 3.9% | ||||
Average month-end occupancy | 94.3% | 94.9% | 94.9% | 95.8% | ||||
Lease termination fee income | $75,000 | $334,000 | $300,000 | $812,000 | ||||
Bad debt expense | $250,000 | $800,000 | $1.0 million | $992,000 | ||||
Development starts: | ||||||||
Square feet | 341,000 | 1.3 million | 1.2 million | 1.2 million | ||||
Projected total investment | $27 million | $100 million | $95 million | $94 million | ||||
Development-stage property acquisitions | None | None | None | $88 million | ||||
Operating property acquisitions | $16 million | $52 million | $60 million | $24 million | ||||
Operating property dispositions (Potential gains on dispositions are not included in the projections) | $5 million | $36 million | $40 million | $76 million | ||||
Gain (loss) on sales of non-operating real estate | None | ($40,000) | None | $733,000 | ||||
Average variable interest rate on unsecured bank credit facilities | 2.0% | 2.0% | 1.9% | 1.5% | ||||
Unsecured debt closing in period | None | $70 million at 4.0% | $90 million at 4.0% weighted average interest rate | $205 million at 3.1% weighted average interest rate | ||||
Common stock issuances | $20 million | $60 million | $40 million | $60 million | ||||
General and administrative expense | $3.2 million | $14.5 million | $14.4 million | $13.2 million | ||||
(1) Represents initial guidance for year 2017 as reported in the Company's February 1, 2017 earnings release of $4.26 per share, less adjustment for General and administrative expense of $.06 per share as disclosed in a press release issued by the Company on March 6, 2017.
DEFINITIONS
The Company’s chief decision makers use two primary measures of operating results in making decisions: (1) property net operating income (PNOI), defined as Income from real estate operations less Expenses from real estate operations (including market-based internal management fee expense) plus the Company's share of income and property operating expenses from its less-than-wholly-owned real estate investments, and (2) funds from operations attributable to common stockholders (FFO). EastGroup defines FFO consistent with the National Association of Real Estate Investment Trusts’ definition, as net income (loss) attributable to common stockholders computed in accordance with U.S. generally accepted accounting principles (GAAP), excluding gains or losses from sales of depreciable real estate property and impairment losses, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.
PNOI and FFO are supplemental industry reporting measurements used to evaluate the performance of the Company’s investments in real estate assets and its operating results. The Company believes that the exclusion of depreciation and amortization in the industry’s calculations of PNOI and FFO provides supplemental indicators of the properties’ performance since real estate values have historically risen or fallen with market conditions. PNOI and FFO as calculated by the Company may not be comparable to similarly titled but differently calculated measures for other
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P. O. Box 22728 – JACKSON, MS 39225 – TEL. 601-354-3555 – FAX 601-352-1441
REITs. Investors should be aware that items excluded from or added back to FFO are significant components in understanding and assessing the Company’s financial performance.
The Company's chief decision makers also use adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) in making decisions. Adjusted EBITDA is defined as Net Income, excluding gains or losses from sales of depreciable real estate property, plus interest, taxes, depreciation and amortization.
CONFERENCE CALL
EastGroup will host a conference call and webcast to discuss the results of its first quarter and review the Company’s current operations on Friday, April 21, 2017, at 11:00 a.m. Eastern Daylight Time. A live broadcast of the conference call is available by dialing 1-877-876-9177 (conference ID: EastGroup) or by webcast through a link on the Company's website at eastgroup.net. If you are unable to listen to the live conference call, a telephone and webcast replay will be available on Friday, April 21, 2017. The telephone replay will be available until Friday, April 28, 2017, and can be accessed by dialing 1-800-839-2456. Also, the replay of the webcast can be accessed through a link on the Company's website at eastgroup.net and will be available until Friday, April 28, 2017.
SUPPLEMENTAL INFORMATION
Supplemental financial information is available in the Investor Relations section (Quarterly Results) of the Company’s website at eastgroup.net or upon request by calling the Company at 601-354-3555.
COMPANY INFORMATION
EastGroup Properties, Inc. is a self-administered equity real estate investment trust focused on the development, acquisition and operation of industrial properties in major Sunbelt markets throughout the United States with an emphasis in the states of Florida, Texas, Arizona, California and North Carolina. The Company’s goal is to maximize shareholder value by being the leading provider in its markets of functional, flexible, and quality business distribution space (primarily in the 5,000 to 50,000 square foot range) for location sensitive customers. The Company’s strategy for growth is based on ownership of premier distribution facilities generally clustered near major transportation features in supply-constrained submarkets. EastGroup’s portfolio, including development projects in lease-up and under construction, currently includes 38.5 million square feet. EastGroup Properties, Inc. press releases are available on the Company’s website at eastgroup.net.
FORWARD-LOOKING STATEMENTS
The Company's assumptions and financial projections in this release are based upon "forward-looking" information and are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “will,” “anticipates,” “expects,” “believes,” “intends,” “plans,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements, which generally are not historical in nature. All statements that address operating performance, events or developments that the Company expects or anticipates will occur in the future, including statements relating to rent and occupancy growth, development activity, the acquisition or sale of properties, general conditions in the geographic areas where the Company operates and the availability of capital, are forward-looking statements. Forward-looking statements are inherently subject to known and unknown risks and uncertainties, many of which the Company cannot predict, including, without limitation:
• | changes in general economic conditions; |
• | the extent of customer defaults or of any early lease terminations; |
• | the Company's ability to lease or re-lease space at current or anticipated rents; |
• | the availability of financing; |
• | failure to maintain credit ratings with rating agencies; |
• | changes in the supply of and demand for industrial/warehouse properties; |
• | increases in interest rate levels; |
• | increases in operating costs; |
• | natural disasters, terrorism, riots and acts of war, and the Company's ability to obtain adequate insurance; |
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P. O. Box 22728 – JACKSON, MS 39225 – TEL. 601-354-3555 – FAX 601-352-1441
• | changes in governmental regulation, tax rates and similar matters; |
• | attracting and retaining key personnel; and |
• | other risks associated with the development and acquisition of properties, including risks that development projects may not be completed on schedule, development or operating costs may be greater than anticipated or acquisitions may not close as scheduled. |
Although the Company believes that the expectations reflected in the forward-looking statements are based upon reasonable assumptions at the time made, the Company can give no assurance that such expectations will be achieved. The Company assumes no obligation whatsoever to publicly update or revise any forward-looking statements. See also the information contained in the Company’s reports filed or to be filed from time to time with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.
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P. O. Box 22728 – JACKSON, MS 39225 – TEL. 601-354-3555 – FAX 601-352-1441
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME | ||||||||
(IN THOUSANDS, EXCEPT PER SHARE DATA) | ||||||||
(UNAUDITED) | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2017 | 2016 | |||||||
REVENUES | ||||||||
Income from real estate operations | $ | 66,137 | 61,568 | |||||
Other income | 17 | 21 | ||||||
66,154 | 61,589 | |||||||
EXPENSES | ||||||||
Expenses from real estate operations | 19,007 | 17,820 | ||||||
Depreciation and amortization | 20,225 | 19,162 | ||||||
General and administrative | 5,478 | 5,312 | ||||||
44,710 | 42,294 | |||||||
OPERATING INCOME | 21,444 | 19,295 | ||||||
OTHER INCOME (EXPENSE) | ||||||||
Interest expense | (8,686 | ) | (9,065 | ) | ||||
Gain on sales of real estate investments | — | 11,332 | ||||||
Other | 215 | 268 | ||||||
NET INCOME | 12,973 | 21,830 | ||||||
Net income attributable to noncontrolling interest in joint ventures | (154 | ) | (119 | ) | ||||
NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | 12,819 | 21,711 | ||||||
Other comprehensive income (loss) - cash flow hedges | 1,410 | (5,397 | ) | |||||
TOTAL COMPREHENSIVE INCOME | $ | 14,229 | 16,314 | |||||
BASIC PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | ||||||||
Net income attributable to common stockholders | $ | 0.38 | 0.67 | |||||
Weighted average shares outstanding | 33,361 | 32,254 | ||||||
DILUTED PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | ||||||||
Net income attributable to common stockholders | $ | 0.38 | 0.67 | |||||
Weighted average shares outstanding | 33,409 | 32,307 | ||||||
EASTGROUP PROPERTIES, INC. AND SUBSIDIARIES | |||||||
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES | |||||||
(IN THOUSANDS, EXCEPT PER SHARE DATA) | |||||||
(UNAUDITED) | |||||||
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
NET INCOME | $ | 12,973 | 21,830 | ||||
(Gain) on sales of real estate investments | — | (11,332 | ) | ||||
(Gain) loss on sales of non-operating real estate | 40 | (10 | ) | ||||
Interest income | (62 | ) | (64 | ) | |||
Other income | (17 | ) | (21 | ) | |||
Interest rate swap ineffectiveness | — | 5 | |||||
Depreciation and amortization | 20,225 | 19,162 | |||||
Company's share of depreciation from unconsolidated investment | 31 | 31 | |||||
Interest expense (1) | 8,686 | 9,065 | |||||
General and administrative expense (2) | 5,478 | 5,312 | |||||
Noncontrolling interest in PNOI of consolidated 80% joint ventures | (211 | ) | (201 | ) | |||
PROPERTY NET OPERATING INCOME (PNOI) | $ | 47,143 | 43,777 | ||||
COMPONENTS OF PNOI: | |||||||
PNOI from Same Properties | $ | 44,280 | 42,701 | ||||
PNOI from 2016 and 2017 Acquisitions | 673 | — | |||||
PNOI from 2016 and 2017 Development and Redevelopment Properties | 2,290 | 190 | |||||
PNOI from 2016 Operating Property Dispositions | — | 944 | |||||
Other PNOI | (100 | ) | (58 | ) | |||
TOTAL PNOI | $ | 47,143 | 43,777 | ||||
NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | $ | 12,819 | 21,711 | ||||
Depreciation and amortization | 20,225 | 19,162 | |||||
Company's share of depreciation from unconsolidated investment | 31 | 31 | |||||
Depreciation and amortization from noncontrolling interest | (55 | ) | (54 | ) | |||
(Gain) on sales of real estate investments | — | (11,332 | ) | ||||
FUNDS FROM OPERATIONS (FFO) ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | 33,020 | 29,518 | ||||
NET INCOME | $ | 12,973 | 21,830 | ||||
Interest expense (1) | 8,686 | 9,065 | |||||
Depreciation and amortization | 20,225 | 19,162 | |||||
Company's share of depreciation from unconsolidated investment | 31 | 31 | |||||
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) | 41,915 | 50,088 | |||||
(Gain) on sales of real estate investments | — | (11,332 | ) | ||||
ADJUSTED EBITDA | $ | 41,915 | 38,756 | ||||
DILUTED PER COMMON SHARE DATA FOR NET INCOME ATTRIBUTABLE TO EASTGROUP PROPERTIES, INC. COMMON STOCKHOLDERS | |||||||
Net income attributable to common stockholders | $ | 0.38 | 0.67 | ||||
Funds from operations (FFO) attributable to common stockholders | $ | 0.99 | 0.91 | ||||
Weighted average shares outstanding for EPS and FFO purposes | 33,409 | 32,307 | |||||
(1) Net of capitalized interest of $1,646 and $1,162 for the three months ended March 31, 2017 and 2016, respectively. | |||||||
(2) Net of capitalized development costs of $1,244 and $891 for the three months ended March 31, 2017 and 2016, respectively. | |||||||